With its digital freight brokerage, Amazon is competing in a growing market with online firms like Convoy, Transfix, Loadsmart, project 44 and Uber Freight.

Long a provider of fulfillment and delivery services that can help sellers stand out on its marketplace, Amazon.com Inc. is expanding its role in the shipping industry with an online freight brokerage connecting shippers and carriers.

The digital brokerage, at freight.amazon.com, is operating for now in a beta test phase, with service available in Connecticut, Maryland, New Jersey, New York and Pennsylvania, according to a notice on the website. The brokerage, which offers full-truckload services on 53-foot trailers, lets shippers set up online accounts and view rates once they choose pick-up and delivery destinations by ZIP codes. Amazon hasn’t said when it may expand the freight brokerage service beyond the test states.

Although still in a beta phase, news of the service has led to multiple reports in logistics publications and other venues regarding how Amazon is out to, at least temporarily, sharply undercut market shipping rates by approximately 30%. Amazon, however, denies having such a strategy. “The analysis suggesting dramatic undercutting of pricing is false,” Amazon said in a prepared statement.

Amazon promises ‘best-in-class’ service

On the home page of its freight services site, Amazon invites shippers to “tap into the scale of Amazon as we extend our carrier network to give you best-in-class service at great rates.”

Amazon adds that the digital brokerage service is a continuation of earlier forms of it. “We work with many line-haul service providers in our transportation network and have long utilized them to carry loads for Amazon,” the company says. “This service, intended to better utilize our freight network, has been around in various forms for quite some time.”

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A review of Amazon’s brokerage site today revealed the following rates for hauling freight in a full 53-foot truckload from Midtown Manhattan in New York City: $530.98 to the village of Carmel, New York, about 50 miles to the north; and $567.32 from Midtown to Philadelphia.

Investments heading into digital freight services

Amazon’s digital brokerage service is addressing the growing trend for shippers to use digital services designed to quickly match shipping demand with available trucking capacity. And it’s looking to grow in a shipping services market already served by a number of digital competitors that have emerged in recent years, including Convoy, Transfix, Uber Freight, Loadsmart and project44. J.B. Hunt Transport Inc., a long-time provider of freight and supply chain services, in 2017 launched in a $500 million investment the J.B. Hunt 360 Marketplace, which it said is designed to use “real-time data with artificial intelligence to match freight with capacity, pairing the right load with the right carrier to create efficiency and cost savings.”

Investments have also been flowing into other digital freight services. Project44 received $45 million last fall, and technology kingpins Marc Benioff, Bill Gates and Jeff Bezos have contributed to Convoy.

While Amazon’s digital freight brokerage service focuses on large freight shipments, the company has also been expanding its capacity to handle smaller-package delivery. Amazon last fall acquired 20,000 delivery vans for increasing its ability to provide “last-mile” delivery to customers.

David Spitz, CEO of ChannelAdvisor Corp., which helps businesses sell through Amazon and other online marketplaces, says further developing logistics services fits in with Amazon’s overall growth strategy. “We believe logistics, especially last-mile, is critical to Amazon’s core value proposition as consumers have come to expect very fast and low-cost or free delivery,” he says.

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But the logistics industry is only growing physical capacity at a fraction of the rate of the growth of e-commerce, he adds. “We believe this motivates Amazon to ‘verticalize’ more of its logistics network so it is not dependent on third party carriers to keep up and maintain this essential value proposition.  As we’ve seen with Fulfillment By Amazon and Amazon Web Services, once Amazon perfects a scalable solution for its own needs, it has a history of productizing those solutions and monetizing them with third parties, and we believe the same may be true with logistics.”

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